Derma Pen v. 4EverYoung Limited et al

Filing 213

MEMORANDUM DECISION and Order re: Choice of Law for August 2014 Proceedings-See Order for details. Signed by Judge David Nuffer on 6/26/14. (jmr)

IN THE UNITED STATES DISTRICT COURT
DISTRICT OF UTAH, CENTRAL DIVISION
DERMA PEN, LLC,
Plaintiff,
v.

MEMORANDUM DECISION AND
ORDER RE: CHOICE OF LAW FOR
AUGUST 2014 PROCEEDINGS

4EVERYOUNG LIMITED,
DERMAPENWORLD, BIOSOFT (AUST)
PTY LTD d/b/a DERMAPENWORLD,
EQUIPMED INTERNATIONAL PTY LTD
d/b/a DERMAPENWORLD, and STENE
MARSHALL d/b/a DERMAPENWORLD,

Case No.: 2:13-cv-00729-DN

Defendants.

District Judge David Nuffer

The parties dispute whether Utah or United Kingdom law applies to decide the parties'
claims arising under the Agreement between Derma Pen, LLC ("Derma Pen") and 4EverYoung
Limited ("4EverYoung"). They also dispute whether Utah is the proper venue for determining the
value of Derma Pen's trademark and domain name. The parties submitted briefs on these issues
at the court's direction 1 and argued the issues on June 25, 2014. 2 This order determines that in the
August 2014 trial on Derma Pen's 22nd and 24th causes of action and 4EverYoung's 1st cause of
action (limited to Derma Pen's obligations under the Agreement to tender the trademark and
domain name for purchase), Utah law will govern.

1

Supplemental Memorandum Regarding Valuation and Choice-of-Law Provisions in the Agreement, docket no. 115,
filed April 28, 2014.
2

Plaintiff's Supplemental Brief Regarding Application of the Sales Distribution Agreement’s Valuation and Choiceof-Law Provisions, docket no. 151, filed May 12, 2014.

BACKGROUND
4EverYoung is a company organized under the laws of the United Kingdom. 3 Derma Pen
is a company organized under the laws of the State of Utah. 4 Derma Pen and 4EverYoung signed
a sales distribution agreement ("Agreement") on August 2, 2011. Under the Agreement
4EverYoung supplied products to Derma Pen. The agreement was allegedly terminated as of
August 1, 2013. 5
The Agreement provided that on termination Derma Pen "agrees to offer the Derma Pen
[sic] Trademark in the US for sale to 4EVER YOUNG and 4EVER YOUNG has the first right of
refusal for such trademark." 6 A similar provision applies to the www.dermapen.com domain
name. 7
The Original Complaint
On August 1, 2013, Derma Pen filed a 65 page 21 count complaint against 4EverYoung
and related entities for rescission due to fraudulent inducement, breach of contract, unfair
competition, trademark infringement and declaratory judgment among other causes of action.
Derma Pen's original complaint 8 alleged that "[t]his is an action for rescission and fraudulent
inducement, or, in the alternative, breach of contract under Utah law. . ." 9 The prayer for relief

3

First Amended Complaint ¶ 1 at 2, docket no. 118, filed May 1, 2014 (unredacted version filed under seal as docket
no. 136, May 2, 2014); Answer to First Amended Complaint, Counterclaim, Third-Party Amended Complaint, and
Demand for Jury Trial ("Answer and Counterclaim") ¶ 1 at 2, docket no. 139, filed May 2, 2014.
4

First Amended Complaint ¶ 2 at 2; Answer and Counterclaim ¶ 2 at 2.

5

First Amended Complaint ¶ 97 at 22.

6

Sales Distribution Agreement ("Agreement") §12.2, docket no. 25, filed under seal October 10, 2013.

7

Id. §14.6.

8

Complaint, docket no. 2, filed August 1, 2013.

9

Id. ¶ 7 at 3 (emphasis added).
2

asked (twice) for "all relief to which [Derma Pen is] entitled under 15 U.S.C. § 1051 et seq., 17
U.S.C. § 101 et seq., and Utah statutory and common law . . . ." 10
Most of the claims in the complaint are federal or Utah statutory or tort claims dependent
at least somewhat on the effect of the Agreement. But three causes of action relate directly to the
Agreement. After the first cause of action which sought rescission of the Agreement for
fraudulent inducement, the second cause of action alleged an alternative breach of contract
claim. The twenty-first cause of action sought a declaratory judgment that "4EverYoung is not
entitled to a right of first refusal and Derma Pen has no obligation to sell and/or assign its right to
the DERMAPEN® Mark to 4EverYoung upon termination of the Agreement."
Agreement Provisions Regarding Venue and Governing Law
The complaint did not attach the Agreement. In response to court order 11 Derma Pen filed
a copy of the Agreement. 12 The Agreement, which was drafted by 4EverYoung but fully
negotiated by the parties, contains a "Governing Law" provision that states:
17.7. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the United Kingdom. This Venue Agreement shall be
enforced in London, United Kingdom. 13
There are two other related provisions of the Agreement at issue. Sections 12.2 and 14.6
state that if the parties are unable to reach agreement on the respective values of the trademark
and domain name, "the value will be determined by the courts of the land that is governing this
contract and their decision will be final and binding upon both parties." 14

10

Complaint Prayer for Relief ¶ B at 60 and ¶ H at 62.

11

Docket text order, docket no. 19, filed October 9, 2013.

12

Docket no. 25, filed under seal October 10, 2013.

13

Id.

14

Id.
3

Early Venue Dispute
In response to Derma Pen's motion for a temporary restraining order, 15 4EverYoung
argued that venue in the United Kingdom was proper. 16 Derma Pen resisted these arguments,
disregarding its contract-based claims for breach and declaratory relief. "The District of Utah is
the proper venue for Derma Pen's claims." 17 "The choice of law clause in the agreement does not
apply here." 18 But because Derma Pen's causes of action depended on determination of the
parties' contractual rights, if any, this action was stayed pending the outcome of proceedings in
the United Kingdom. 19
After 4EverYoung's efforts to litigate in the United Kingdom revealed how challenging
and expensive that would be, 4EverYoung sought relief from the stay, abdicating its insistence on
litigation in London and arguing that Utah law should apply. "Defendants hereby waive,
knowingly and voluntarily, their rights under the forum selection and choice of law provisions of
the Agreement. . . ." 20 But Derma Pen contended that the United Kingdom was the proper forum
for contract issues in this case and that the court should not accept 4EverYoung's invitation to
rewrite the Agreement. 21

15

Plaintiff Derma Pen, LLC's Motion For Temporary Restraining Order and Preliminary Injunction and
Incorporated Memorandum of Law, docket no. 11, filed October 9, 2013.

16

[4EverYoung's] Opposition to Plaintiff's Motion for Temporary Restraining Order and Preliminary Injunction at 5,
docket no. 48, filed October 19, 2013.
17

Plaintiff Derma Pen, LLC's Reply in Support of Motion for Temporary Restraining Order and Preliminary
Injunction at 18, docket no. 57, filed October 23, 2013.

18

Id. at 20.

19

Memorandum Decision and Order Partially Staying Case, docket no. 89, filed November 20, 2013.

20

Defendants' Motion To Lift Stay, Memorandum In Support, and Request for Scheduling Conference at 4, docket
no. 103, filed March 13, 2014.
21

Plaintiff's Response to Defendants' Motion to Lift Stay at 12-13, docket no. 104, filed March 31, 2014.
4

At a hearing held April 17, 2014, the parties agreed that the venue provision under
section 17.7 of the Agreement was waived and that the action could proceed in this court. 22
Derma Pen was careful, in spite of 4EverYoung's desire to also waive the governing law
provision and valuation venue provision, 23 to confine its waiver to 17.7. 24 No ruling was made
on governing law or venue valuation. 25
Amended Complaint
Derma Pen has since filed its First Amended Complaint, in which it asserts 24 causes of
action which again include its claims for rescission, breach of contract, and declaratory relief.
Derma Pen's First Amended Complaint does not allege that its breach of contract claim arises
under Utah law. But it still claims relief under Utah statutory and common law, 26 without
mentioning the law of the United Kingdom. 4EverYoung and its related entities filed
counterclaims and third party claims asserting seven causes of action against Derma Pen. One of
those claim is for breach of contract. 27
Procedural Status
For reasons described in greater detail in the Memorandum Decision and Order Re:
Expedited Schedule on Rescission Claims and Trademark Rights and Staying All Other Issues in
the Case, 28 liability and equitable relief issues in Derma Pen's 22nd and 24th causes of action and
part of 4EverYoung's 1st cause of action have been bifurcated and are scheduled for jury trial in

22

Transcript of Proceedings April 17, 2014 at 26:9-13, docket no. 111, filed April 24, 2014.

23

Id. at 19:17-24.

24

Id. at 24:6-16

25

Id. at 24:18-25:2.

26

Amended Complaint Prayer for Relief ¶ X at 155 and ¶ Q at 153.

27

Answer and Counterclaim, First Cause of Action at 85-86.

28

Docket no. 155, filed May 15, 2014.
5

August 2014. 29 For this upcoming trial, the parties need to know whether whether United
Kingdom or Utah law should govern the causes of action arising under the Agreement.
DISCUSSION
Derma Pen originally invoked Utah law in its complaint related to its allegations arising
from the Agreement. Nowhere in its complaint or amended complaint did Derma Pen cite to or
rely on the law of the United Kingdom. Derma Pen, the plaintiff, chose to bring this action in this
court and expressly invoked Utah and federal law for all of its claims without pleading or
respecting the choice of law provision in the Agreement. When 4EverYoung insisted on its
contractual right to litigate in London, the case was stayed, over Derma Pen's strenuous
objections. Derma Pen made its election regarding applicable law at filing of the complaint and
cannot revoke it. Derma Pen's express invocation of Utah law and its failure to attach the
Agreement to its complaint constitutes a waiver of UK law to the contract claims. 30
Derma Pen has also failed to show that there is any meaningful difference between Utah
law and the law of the United Kingdom regarding its 24th cause of action and 4EverYoung's 1st
cause of action. Absent this showing, it makes little sense to apply United Kingdom law to the
parties' contractual dispute.
Derma Pen's reversal of position appears to be driven by concern that the choice of law
decision on the three contract related claims will impact the decision on venue for valuation
under sections 12.2 and 14.6 of the contract. Derma Pen has a rescission claim that might vitiate

29

Memorandum Decision and Order re: Jury Trial on Derma Pen, LLC's 22nd and 24th Causes of Action and Part of
Defendants' 1st Counterclaim Cause of Action, docket no. 207, filed June 24, 2014.

30

Cf. Grecon Dimter, Inc. v. Horner Flooring Co., Inc., No. 04-1178, 114 Fed.Appx. 64 (4th Cir. 2004)
(unpublished) (holding that a party's implicit reliance on North Carolina law in its complaint was insufficient to
waive the choice of law provision in a contract when the party attached to its complaint the contracts containing the
choice of law provision); see also Viscofan USA, Inc. v. Flint Group, No. 08-cv-2066, 2009 WL 1285529, (C.D. Ill.
May 7, 2009) (unpublished) (holding that Defendant waived right to invoke forum selection clause when it failed to
raise it in its answer).
6

the provisions. Whether 4EverYoung is entitled to specific performance of sections 12.2 and 14.6
will be determined in August, by this court relying in party on jury findings. There may be
unfulfilled steps in the processes contemplated under sections 12.2 and 14.6 that might be
ordered to be performed. The meaning of "the courts of the land that is governing this contract"
and other issues regarding the clause must be decided. Only after all those hurdles would a
judicial valuation be relevant.
Even if valuation is found to be proper only in the United Kingdom, specific performance
of the obligation to transfer the trademark and domain name is an issue for this court under the
venue stipulation. But specific performance would likely not be ordered by this court unless
4EverYoung posted court-determined security sufficient to cover any anticipated valuation. The
bond amount would be sufficient to pay any valuation that would occur in the United Kingdom.
For purposes of the August 2014 trial, Utah law will govern Derma Pen's 22nd and 24th
causes of action and 4EverYoung's 1st cause of action (limited to Derma Pen's obligations under
the Agreement to tender the trademark and domain name for purchase).
Dated June 26, 2014.
BY THE COURT:
____________________________
David Nuffer
United States District Judge

7